Summary Of Key Impacts: Budget 2015 Update

Following last week’s pre-election Budget, we have prepared a summary of the key impacts and tax changes that were outlined by the Chancellor. We hope that you or your clients find the information useful, and if you would like to discuss any of the issues in more detail, and how they affect your financial situation, please feel free to call us on 0800 731 7614.

Proposed pension measures

The Lifetime Allowance reduces from £1.25m to £1m on 6th April 2016, but will increase annually by CPI from 6th April 2018. Transitional protection will protect existing pension rights.

On a positive note, the Annual Allowance is unchanged at £40,000 and higher and additional rate tax relief remains available for individual pension contributions.

In addition to the 6th April 2015 ‘Freedom and Choice in Pensions’ reforms, people already receiving annuity income will, from April 2016, be able to have their annuity income assigned to a third party in exchange for a lump sum or an alternative retirement product.

Increases to Income Tax bands and allowances

Proposed rises to the personal allowance and basic rate limit will result in the higher rate threshold, above which individuals pay income tax at 40%, increasing from £42,385 in 2015/2016 to £42,700 and £43,300 for 2016/2017 and 2017/2018.

A large percentage of the population will still be higher rate tax payers who can benefit from tax-relieved pension saving at 40%.

Proposed ISA changes from Autumn 2015

Individuals will be able to withdraw and replace money from their cash ISA in the same tax year without it counting towards their annual ISA subscription limit.

A new Help to Buy ISA will be introduced. For every £200 a first time buyer saves, the Government will provide a £50 bonus up to a maximum of £3,000 on £12,000 of savings, at the point they use their savings to purchase their first home.

A new Personal Savings Allowance from 6 April 2016

Intended to remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers. Additional rate taxpayers will not receive an allowance.

It’s interaction with the £5,000 0% band for savings income may cause confusion, however low earners will potentially be able to benefit from both and pay no tax on their savings where total taxable income is less than £16,800 in 2016/2017.

As ever, it is important to consider all aspects of the budget and it’s vital to seek advice from a qualified Chartered Financial Adviser when establishing how to best structure your medium-long-term investment plans, or an independent mortgage advisor with access to the broadest range of deal across all lenders.

If you would like to speak to us about your own financial situation, please call us on 0800 731 7614 or by e-mail at enquiries@fpgonline.co.uk and we’d be delighted to help.